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Resale suburban prices rise

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resale suburban property

AVERAGE resale prices for suburban condominiums exceeded $1,000 psf last month, the first time they have passed what for many buyers is a daunting level.

Prices rose 5.1 per cent to a record $1,046 psf in February compared with January, said the Singapore Real Estate Exchange (SRX) yesterday.

Average condo resale prices in the city fringe were also up last month, adding 3.1 per cent from January to a record $1,272 psf.

OrangeTee research and consultancy head Christine Li said prices in these areas probably rose because buyers were going for smaller homes with lower total quantums, likely in response to lower borrowing limits and higher cash down payments imposed in January’s cooling measures.

“As small units typically have higher per square foot prices than larger units, we expect resale prices in psf compiled by SRX to go up in the coming months,” she added.

In contrast, average resale prices in the city centre declined 4.7 per cent month-on-month to $1,788 psf in February.

R’ST Research director Ong Kah Seng said the dip reflected significant unsold new homes and weaker leasing demand due to firms cutting expatriate allowances amid global economic uncertainty.

The SRX also reported that the Chinese New Year break resulted in February resales dropping by more than half from January.

Only 325 resales were carried out last month, according to flash figures, but that was still higher than the 309 transactions reported in January last year, the month in which Chinese New Year fell.

The continued growth in property values combined with softer rents also squeezed rental yields.

Yields dipped 0.2 per cent in the city fringe and suburban regions last month from January, although they inched up 0.1 per cent in the city centre.

Rents fell islandwide, with the sharpest decline in the city fringe, down 1.9 per cent in February from January.

Suburban home rents fell 1.6 per cent and city centre rents decreased 0.4 per cent.

However, rents for shoebox units – flats up to 500 sq feet – went the other way, rising 1.8 per cent in psf terms overall.

Shoebox apartments rented for $6.17 psf per month on average in suburban areas last month, twice the $3.07 psf for larger units in the same region, according to SRX flash figures.

That was almost as high as city-fringe shoebox rentals, which were $6.34 psf per month on average. Their larger counterparts had monthly average rentals of $3.80 psf.

Rentals for city centre shoebox units were $7.40 psf per month on average, 63 per cent higher than the $4.54 psf for larger units in that area.

2013: Big Fall in Property Prices Unlikely

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IT would take an interest rate shock, poor GDP growth, or both, to bring down private property prices here noticeably over the next five years, a study said.

The Credit Suisse report noted that analysts are anticipating that prices will fall as a record supply of land comes on stream and as the US Federal Reserve tightens monetary policy.

US Liquidity

But it forecast that prices will rise by about 8 per cent by the end of 2017, based on the central scenario from its modelling. The report also said that not all of the government’s cooling measures have been effective in bringing down prices, even if they have dampened transactions temporarily.

“Contrary to the view of many, our analysis shows that prices will only correct marginally by 2017, if the government pushes out the supply of property as aggressively as it has over the last three years through its Government Land Sales programme,” said Michael Wan, the analyst at Credit Suisse behind the report.

If government land releases stay at the same “rapid pace” of around 16,000 units each year, prices will come down around one per cent by 2017, the report said, which indicates that an oversupply is unlikely.

“However, if this scenario coincides with a meaningful GDP or interest rate shock, prices would obviously fall much more,” the report said.

Credit Suisse defines a GDP shock as a scenario where output expands by a total of 5 per cent over the next five years, and assuming that loans and the Straits Times Index grow at the same pace.

Property prices will drop 16 per cent under this scenario.

Describing such a development as “unlikely” but “not impossible”, Credit Suisse said the bank had predicted that GDP will shrink by more than 9 per cent in the scenario of a full-blown eurozone break-up.

But if nominal output can grow by 7 per cent each year, with the same assumptions, prices will surge 23 per cent by 2017.

As for interest rates, Credit Suisse expects prices to fall a cumulative 14 per cent between 2013 and 2017 if the Singapore Interbank Offered Rate rises to 7 per cent in that time.

It said rates have not reached that level since the 1998 Asian financial crisis, and there has to be a very strong growth or a sharp pick-up in inflation in the US economy to see such a high rate returning, due to the close links between the US and Singapore economies.